Crude Oil Prices have been increased by 4% after Iran’s missile attacks on Israel. Due to this, the supply of oil may be affected. Experts say that if the rise in oil prices continues, it can become a big problem for the Indian economy.
The reason for this is that India meets most of its oil needs through imports. After Iran’s attacks, Israel has threatened to take revenge. It has been said that Iran will have to pay a big price for these attacks. In such a situation, crude may rise further in the future.
Inflation increases in India due to an increase in Crude Oil Prices
According to experts, for every 10-dollar increase in the price of crude oil, inflation in India increases by 0.3%. At the same time, the current account deficit (CAD) increases by 12.5 billion dollars. This is equal to about 43 basis points of GDP.
It also affects the purchasing power of people in India
The purchasing power of people in India is also affected due to the rising crude oil prices. The reason for this is that people have to spend more on transportation. Also, this increases the prices of goods and services.
Iran exports 17 lakh barrels of Crude Oil daily.
According to experts, due to the cost of crude oil, India will have to spend more dollars. This will weaken the rupee. Iran exports 17 lakh barrels of oil daily. It is a member of OPEC, the organization of oil-producing countries.
Iran is located near the Strait of Hormuz, from where a large supply of oil passes. Big oil-producing countries like Saudi Arabia, Qatar, and UAE use this route to export oil.
OPEC countries have a 40% share of the world’s oil supply
OPEC countries have a 40% share of the world’s oil supply. OPEC’s decision has a direct impact on oil prices. If oil prices remain high for a long time, it can create problems for many emerging countries like India.
There is already some pressure on the economy in India
There is already some pressure on the economy in India. Manufacturing PMI has fallen to an 8-month low in September. The current account deficit (CAD) has increased to 1.1% of GDP in the first quarter. In such a situation, the pressure on the economy will increase due to rising oil prices.
India will have to pay more for the import of essential goods
If the current account deficit increases, India will have to spend more dollars. This means that the rupee will weaken. This will make imports expensive. Due to this, India will have to pay more for the import of essential goods.
Retail inflation reached close to 4% in August.
The share of fuel and light in retail inflation is 6.84%. This means that expensive oil can become the reason for rising inflation in India. This will once again create the risk of rising inflation, which has come close to 4% in August.
